When to re-enter the market?

[Placebo]

Interesting discussion...!

Have to say I am utterly in awe Phaedrus, that anyone can make a gain in this current market. No fricken way will you find me in there! I am truly the "boring old fart" that Macdunk accuses you of being!

Personally i think you have lost some credibility here, not content with rubbishing everybody elses methods you are now not even sticking to your own plan

Nonsense. If anything his reputation is enhanced.

[Arbitrage]

Phaedrus,
Considering the influence the Telecom share price has on the NZSX50, have you ever removed that share price from the database and replotted the index?
It seems that a number of the other major shares in the index have appeared to "turn the corner" and I was wondering whether the Telecom impact was acting as a drag on what, without Telecom, seems to be a more positive trend.
Any comments?

[Dr_Who]

Phaedrus, would you have earned more just leaving money in the bank?

If you have recently invested in energy stocks like PRC & NZO, then no, your would not have made more money leaving it in the bank.

[Phaedrus]

Phaedrus, considering the influence the Telecom share price has on the NZSX50, have you ever removed that share price from the database and replotted the index? It seems that a number of the other major shares in the index have appeared to "turn the corner" and I was wondering whether the Telecom impact was acting as a drag on what, without Telecom, seems to be a more positive trend. Any comments?

That is a very good idea Arbitrage and you make a valid point - but unfortunately it's easier said than done. I do not synthesize the Index from its individual constituent stocks - I download the Index data direct from my supplier and it would be quite a difficult task to "subtract" TEL from it. TEL does not totally dominate the Index though. You can see that the Index and TEL can and do move in different directions for months on end. I have marked the more obvious divergences here :-

[tobo]

.....TEL does not totally dominate the Index though. You can see that the Index and TEL can and do move in different directions for months on end.....

Thanks for that chart, Phaedrus. Very revealing.
The big divergences support Arb's contention that a "NZX49" without TEL would look different.
It would take brain calisthenics to figure it out exactly, but along the lines of:
taking Nov-Dec 07 NZX50 rose 3450 to 3600 (+4.4%).
Included in that is TEL's proportion of mkt cap x -7.1% drop ($5.60 to 5.20).
So "NZX49" would have been quite a bit more than +4.4%

Interesting idea. I suppose thats where industry sector indicies started

[winner69]

Thanks for that chart, Phaedrus. Very revealing.
The big divergences support Arb's contention that a "NZX49" without TEL would look different.
It would take brain calisthenics to figure it out exactly, but along the lines of:
taking Nov-Dec 07 NZX50 rose 3450 to 3600 (+4.4%).
Included in that is TEL's proportion of mkt cap x -7.1% drop ($5.60 to 5.20).
So "NZX49" would have been quite a bit more than +4.4%

Interesting idea. I suppose thats where industry sector indicies started

....but remember the NZ50 is gross index so TEL huge regular dividend makes some difference.

[Snoopy]

....but remember the NZ50 is gross index so TEL huge regular dividend makes some difference.

"Some difference"? I guess that is one way of putting it.

Running the actual numbers from 30th September 2006 -which is the time line of Phaedrus's price chart- when the Telecom share price was $4.35: Let's assume we held 9 Telecom shares on that date, giving a total Telecom investment of

9 x $4.35= $42.57

Today we have only have 8 shares valued at $3.58 (as one in 9 have been cancelled). The total value of our Telecom investment is now

8 x $3.58= $28.64.

However in the interim we have had a one off payment of $4.88 (the share that was cancelled half way through the year) and the following dividends:

(0.07+0.07)(8) +(0.145+0.07+0.07+0.07+0.12)(9)= $5.40.

That lot adds up to 'benefits per 8 shares over our time period' - of:

$5.40+$4.88= $10.28

So our total loss on our Telecom investment is:

$42.57-($28.64+$10.28)= $3.65, or 8.6% of the original investment total of $42.57.

Over that same period the NZX 50 has moved from around 3500 to around 3500. IOW it has hardly changed. In fact if you remove Telecom's performance of last week (where it declined by over 10%) there was almost no difference between the performance of the NZX50 and Telecom.

One week ago the argument would have been the other way around. Up until that time Telecom was *supporting* the NZX50. The hypothetical 'NZX49' would have been weaker if you had removed Telecom from the index.

SNOOPY

[winner69]

Snoopy .... just a quick look at the NZX10 stocks would suggest TEL isn't the real driver of the performance of the NZ50 --- the FPA and FPH charts look like TEL and then the likes of AIA and FBU all gou up from Sep06 and then back to the same level as it was then.

Maybe somebody has the data by stock of the movements in the NZ50 .... but outside of the top 10 one really good stock (I take it there is one putside of NZO) wouldn't make difference to the overall index

[Phaedrus]

.....Running the actual numbers from 30th September 2006 - which is the time line of Phaedrus's price chart - when the Telecom share price was $4.35......

I think you have misread the chart dates, Snoopy. The chart began 30th September 2005 - when the Telecom shareprice was $6.02. (TEL shareprice scale in blue on the right).

If you re-run your calculations using this figure, you will find that you are led to a very different conclusion!

[Arbitrage]

Cheers Phaedrus.

It makes one think about the "usefulness" of the NZSX50 as an index for describing market direction which we see on the telly every night, and some people use in their investment decision making.